How we earned $36,000 in passive income w/ roommates

Updated: Jan 27, 2020

I often get asked how I am able to own a house in California where houses prices are thorugh the roof, and income levels are mediocre. It's quite simple actually... ROOMATES! Now before you start shaking your head, and think, "Forget that, Roomates are a pain!" Just consider it. I live in a 4 bedroom house. My fiancé who is in nursing school and I live in the master bedroom, leaving three rooms open.

When I first moved in, I didn't think people would be willing to pay much for a room. Maybe $500 to $600. So initially I started off with that mindset, renting out the 3 rooms for $600 each to close friends of mine. So breaking down the math

$600 per month x 3 rooms = $1800 per month.

$1,800 per month x 12 months = $21,600 per year.

Not too shabby right. That just about covers my mortgage by renting out rooms. Not just rooms, but empty rooms that I never used!

I always encourage my friends, family, and people that ask to consider what they really use those spare rooms for. Are they just sitting their being used to store your excess crap that you will never use? Are they just empty? Or do you use the rooms as a home office for your business or work? Is it an exercise room that is used every day benefiting your overall health. Unless the room is truly producing some kind of major benefit to you.... you are literally throwing away money.

By now, you may thinking to yourself, this doesn't sound to bad right. Or you may be a hater saying $21,600 still isn't worth it. But think about the last time you had a $21,600 raise? What would that do for your financial life or your family if you added $21,600 a year to your income. In two years you could buy a rental house, replace your worn out vehicle, saved for a college fund for your kids, take a memorable trip, bought a toy, invested, or even paid off all of your debt.

But it gets even better. As time went on, my buddies were able to save for their own houses by paying only $600 a month instead of $1400 plus a month renting a apartment in California. So naturally they slowly began to move out. So once again I began to have open rooms that were doing absolutely nothing for me.

So naturally I began to look for new people to rent the rooms. Except this time I did my homework and researched. I began asking around to see what other people were renting their rooms out for. I looked on local websites like Craigslist. And after a few hours of research, I was shocked to learn rooms were renting for way more than I ever thought they would. People were renting rooms up to $800 a month in my area. Now $800 I felt was a little overpriced. But what about $700?

So after a few hours of research, 20 minutes creating a ad for a room for rent at $700 a month, I was up and running again. Before I knew it, I began getting notifications of new emails. I couldn't believe it. This was the easiest thing I had ever done. And they were willing to pay $700 a month per room practically begging to move in.

NOTE: Make sure you always interview people, conduct a background check, and find a contract online or even type one if you must stating the terms of the rental room. I always ask for security deposit, state no drugs, no pets, no random people coming in and out of the house, and no overnight guest.

Before I knew it, one room was renting for $600 a month, and the other two rooms were renting for $700. Time to redo the math!

$600 (1 room at $600) + $1,400 (2 rooms at $700) = $2,000 a month.

$2,000 a month x 12 months = A whopping $24,000 a year.

I don't know about you, but $24,000 a year has a serious beneficial impact on my financial life.

Now for the nay sayers, you do have some valid points. Yes my fiancé and I have to make sacrifices by living other people. Yes we don't get to have the house completely to our selves. Yes they may leave a mess here and there. But at the end of the day, what is that extra income worth to you?

Renting out rooms is a very viable way to create extra income. Just like back to your early adult days where you and friend rented an apartment together, now your just renting out the extra rooms in your house... Except now you are the landlord! Now you are the one financially benefiting. If your someone like me constantly looking for ways to make more money, build wealth, and hopefully retire early one day, consider renting out those spare rooms. It's a way my fiancé and I were able to earn $36,000 in passive income in just over a year and a half!

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